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My long term trading style is one system, many markets. It is not hard to
develop a simple long trend following system. Try channel breakout, MA,
bollinger band breakout...if you use window lengths of 100+ daily bars you
will find profitable performance on most markets. On my spreadsheets, I have
the 60 most active US markets. Only a couple of markets are losers over a 20
year period. Sharpe ratios on each individual market range from .10 to .70.
None of these are great to trade alone. But combine 6 and you get Sharpe
ratios on the order of 1.3 - 1.8.
To select a portfolio, I play around with different market combos keeping
market weights the same (measured by $$volatility) and try to pick markets
from each sector (currency, irate, energy, grain, soft, metal, etc). I
figure this is my best bet to avoid optimization. I use Sharpe ratio as the
main selection factor.
SH
----- Original Message -----
From: "Craig" <craigbud@xxxxxxxxxxx>
To: <omega-list@xxxxxxxxxx>
Sent: Wednesday, October 24, 2001 7:29 AM
Subject: Portfolio trading question
> Suppose you have a group of markets and one trading system. You want to
> split your capital between two markets and trade them simultaneously. How
> does one choose?
>
> Perhaps the trading system needs to pass the robust test first: favorable
> profit factors across several markets going back several years. If the
> system is robust, you simply choose two markets having the least
correlation.
>
> You could pick the two best performers, but isn't there something wrong
> with that approach?
>
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